New Delhi: The Centre has decided to set aside an additional Rs22,000 crore to pay fertilizer subsidy dues to manufacturers, to ensure adequate supply.
The government will pay the dues in cash and the additional allocation is expected to cover for subsidy dues till the halfway mark of the current fiscal year that ends in March, chemicals and fertilizers minister Ram Vilas Paswan said on Wednesday.
“We are happy and thankful to the government. But this is a temporary step,” said Satish Chander, director general of trade lobby Fertiliser Association of India (FAI).
The government has already allocated Rs32,000 crore for fertilizer subsidies in the national budget this year. It fixes the maximum retail price a farmer pays for fertilizers and compensates the producer through the subsidy for selling the products at a lower price.
The latest allocation, however, is still not sufficient to meet the annual subsidy bill for the current fiscal year—estimated to be around Rs1.2 trillion by FAI’s Chander and a ministry official, who declined being named.
The government will pay manufacturers now by borrowing from commercial banks and repay the amount after Parliament authorizes the additional spending that would be included in a supplementary budget, the official said.
One of the lenders would be State Bank of India, the official added, while declining to name the other banks.
The earliest the supplementary budget can be presented is during the monsoon session, dates for which are still to be decided.
“What is of critical importance is that the government gets a sanction of an additional Rs50,000 crore (instead of the Rs22,000 crore) during the mo-nsoon session, so that subsidy dues can be paid till the end of December,” Chander said.
Due to rise in oil prices as well as many imported fertilizer inputs, subsidy payments have skyrocketed in the past four years from Rs15,779 crore in 2004-05 to an estimated Rs1.2 trillion in 2008-09, or 2% of the gross domestic product, the ministry official said.
In the previous fiscal year, the subsidy stood at Rs40,338 crore, which included Rs7,500 crore paid through a first-ever issue of fertilizer bonds. Fertilizer producing firms have been strongly opposing any further issue of such bonds.
Chander said Wednesday’s decision will help companies to continue production and allay scarcity fears.